Leading health groups are calling on the Future Fund to divest itself of tobacco company shares, amid revelations it invested tens of millions of dollars in the sector as the Government was introducing plain packaging laws for cigarettes.

Information provided to a Senate committee shows the fund invested $37.8 million in tobacco shares between December 2010 and February 2012 to top up its existing holdings.

The extra investment contributed to a more than 50 per cent increase in the value of its tobacco shareholdings, taking the total to around $210 million as at June 30.

The move came despite increased Government efforts to warn people of the dangers of smoking and moves to introduce plain packaging laws for cigarettes.

"The Future Fund has a responsibility to invest Australian taxpayers' money in a way consistent with the interests of Australians.

"Investing in the tobacco industry, when it is responsible for millions of dollars of costs to the Australian health system every year, is not in Australia's interests."

Maurice Swanson from the Heart Foundation said: "Australia's reputation as a health leader is being dragged through the mud by continued investment of public money in the tobacco industry".

Greens health spokesman Richard Di Natale says the fund's actions are incredibly disappointing and he is urging the Government to restrict its investment mandate.

"You can't have on one hand a very good public health approach through things like plain packaging and other tobacco control measures, and then on the other hand allow investments in tobacco of Australian taxpayer dollars," Senator Di Natale told ABC News Online.

"Those two things are completely inconsistent [and] the Government could, at the stroke of a pen, change them.

"It's a real shame that the Government is tarnishing some of the great work it's done on tobacco control by not revising the investment mandate it gives to the Future Fund."

Investment policies

The Future Fund was set up by then-treasurer Peter Costello in 2006 but its investment decisions are made by the board, independently of the Federal Government.

When appearing before a Senate committee in May, the Future Fund's managing director Mark Burgess said the investment in tobacco shares was "in line" with the board's policies.

This morning, he said the fund had begun selling tobacco shares in the past few months

"Over that period, (tobacco) shares have been sold by our managers," he said.

"Just to be clear, this is all bought and sold at our managers' discretion."

But Mr Burgess has warned against imposing too many restrictions on what the Future Fund is allowed to invest in.

"There are lots of opinions on lots of industries on lots of issues out there in the community," he said.

"So we have to be very careful in having a very clearly defined exclusions process."

When confronted by Senator Di Natale with claims about how various tobacco companies behaved, Mr Burgess told the Senate hearing that the Future Fund would look at the allegations "closely" to make sure the businesses were acting in accordance with acceptable standards.

The new chairman of the Future Fund Management Agency, David Gonski, did not attend today's Senate hearing due to prior commitments.

Instead, he has agreed to front a special hearing in the next few weeks.

"I think now, the focus will be on the new chairman, Mr Gonski, to see if he will show some leadership on this issue and ensure that we divest ourselves of our tobacco stock," Senator Di Natale said.

The Government's legislation to introduce plain packaging requirements for cigarettes passed Parliament late last year.

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